Dishonour of a cheque due to payment being stopped by the drawer before it is presented does not constitute an offence under Section 138 of the Negotiable Instruments Act.

V. S. Aggarwal, J.

1. By this common judgment both Criminal Misc. No.310-M of 1996 and Criminal Misc. No.307-M of 1996 can conveniently be disposed of together. The facts in both the criminal miscellaneous petitions basically are identical. Therefore, it would be sufficient if the basic facts in Criminal Misc. No.310-M of 1996 are stated.

2. Bhushan Steels and Strips Ltd. , Chandigarh had filed a criminal complaint against the petitioners with respect to the offence punishable under sec. 138 of the Negotiable Instruments Act, 1881 (hereinafter described as the Act) read with Banking Public Financial Institution and Negotiable Instruments Laws (Amendment) Act, 1988 besides Sec.420 Indian Penal Code.

3. It was alleged that Vijay Dalmia is the Director of M/s. Mahaplasto Ltd. , Calcutta. He had for valuable consideration and for clearing the outstanding payment due to M/s. Bhushan Matallics Ltd. , a sister concern of M/s. Bhushan Steels and Strips Ltd. agreed vide letter of 17-7-1995 and had issued certain post-dated cheques. They were drawn at Allahabad Bank, Calcutta in favour of M/s. Bhushan Steels and Strips Ltd. The total amount of the cheques was Rs.11,87,174/-. It was within an assurance that on presentation, the same shall be encashed. Thereafter, the petitioner to avoid the payment and advised the respondent M/s. Bhushan Steel and Strips Ltd. not to present the cheques on one pretext or the other. M/s. Bhushan Steel and Strips Ltd. , however, under intimation to the petitioners presented the cheques for encashment through Punjab National Bank, Sector 28. The same were returned unpaid with the endorsement payment stopped by the drawer. It was asserted that petitioners with mala fide intention had stopped the payment with an object to withhold the payment of the cheques. In fad there were not sufficient funds in the accounts of the petitioners. A legal notice was served calling upon the petitioners to clear the outstanding amount, which was not cleared. The learned Chief Judicial Magistrate, Chandigarh after perusal of the preliminary evidence summoned the petitioners as accused for the offence punishable under Sec.138 of the Negotiable Instruments Act. By virtue of the present petitions filed under Sec.482 of the Code of Criminal Procedure petitioners seek quashing of the orders passed by the Chief Judicial Magistrate, Chandigarh dated 4-11-1995. It is claimed that no case was drawn against the petitioners in the complaint. Respondent had no locus standi to file the complaint. The petitioners had no business transactions with the respondent. The cheques were not issued in discharge of any debt or liability. The cheques were not returned for insufficiency of funds but were returned for payment having been stopped by the drawer. This will not attract the strict provisions of Sec.138 of the Negotiable Instruments Act. The cheques were issued as security and were not meant to be presented.

4. The petition as such has been contested and averments and contentions of the petitioners have been denied.

5. Learned counsel for the petitioners urged that cheques were basically given as a security and there was no legal obligation of the petitioners to pay any amount to the respondents. It was further contended that in any case since the cheques were returned because the payment had been stopped, it will not attract Sec.138 of the Act.

6. Since the petitions are liable to succeed on the last argument of the petitioners, it is unnecessary to consider the other contentions. Sec.138 of the Negotiable Instruments Act was inserted w. e. f.1-4-1989 with a view to penalise the accused in case of dishonour of cheques for insufficiency of funds in the account of the accused. By this statutory provisions a new offence was created. It reads: 138. Dishonour of cheque for insufficiency, etc. , of funds in the account.- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to ano